Saturday, February 27, 2016

Matt Taibbi - how America made Donald Trump unstoppable. I came across a rant about Trump and fascism in der Spiegel a few weeks ago, but didn't bother posting a link because it was such utter bullshit. But now Taibbi's fallen for the same narrative, I have to wade in:

Trump's basic argument is the same one every successful authoritarian movement in recent Western history has made: that the regular guy has been screwed by a conspiracy of incestuous elites. The Bushes are half that conspiratorial picture, fronts for a Republican Party establishment and whose sum total of accomplishments, dating back nearly 30 years, are two failed presidencies, the sweeping loss of manufacturing jobs, and a pair of pitiable Middle Eastern military adventures – the second one achieving nothing but dead American kids and Junior's re-election.

"Authoritarian"? Really? Taibbi (and pretty much everyone on the left) wants to paint Trump as a fascist, and really it's starting to look ignorant.

Isn't Bernie Sanders also arguing that "the regular guy has been screwed by a conspiracy of incestuous elites"? Hell, hasn't Taibbi been arguing this for years? How about Joe Stiglitz or Naomi Klein? Are they also "populist", then?

Yes, Trump is playing dirty and ugly. He's brought the Republican racist dog-whistles out into the open. And honestly, I think he's done this only because he knows that's how he can get the base to vote for him.

Trump doesn't really hate anyone. Why am I so sure? If he was a hateful cunt who drives people away from him, then he would have been a fucking dismal failure in business. Similarly, Trump isn't disconnected from reality, otherwise he would have been a fucking dismal failure in business; and Trump isn't a bellicose psychopath randomly taking stupid chances, either, otherwise he would have been a fucking dismal failure in business.

At best, you can call him pathologically uncensored. But he knows that's where he wins eyeballs. Trump's a showman; but Obama also had to be a showman to get elected. (Remember hope and change? How'd that work out? Did Obama accomplish a single fucking thing before Ted Kennedy passed away and the Democrats lost their senate supermajority?) Don't fault the guy for giving better speeches than Jeb; he's exactly the type of public speaker that the US used to proudly turn out by the thousands, a hundred years ago.

Anyway, the rest of the article is good, but please don't fall for this "Trump is a fascist" bullshit line from the left. They're scared that he really has a shot at getting the Republican nom, and once he gets it he has a much better than 50-50 chance of beating Hilary, given her bankster/kleptocrat connections and her utter lack of standing up for the people in the past 20 years. At this point in time, not even drunk right now, I'd assert that only a Sanders/Warren ticket would have a chance against Trump.

And honestly, I don't think a Trump presidency would be that bad for the US. It might even be a fair bit better than a Hilary presidency. The real fascists are cunts like Cruz and Rubio, and their bankrollers Adelson and the Koch brothers.

Polemic's Pains - all correlations have broken down. Every correlation that you would expect from the broad world market, given the recent dominant narrative, has broken this week:

After writing yesterday about looking for the crack in the correlations to appear to indicate a move from general stress, seeing China (the king of bear stories) fall hard I really thought things didn't look rosy for Europe and US equities. But yet they held in and rallied on the european open. Correlation break 1.

Meanwhile German Bunds were continuing to look bid, which is normally a sign of stress. Of course bunds up, equities up points to all the eggs resting in ECB action, which is somewhat worrying because it is pretty rare for central banks to exceed market demands, leaving scope for disappointment at the next ECB meeting. The other play could be, and here I am guessing, that long Bunds is the European hedge against Brexit. Little has been spoken of risks to Europe on a possible UK departure, instead finding it easier to point the grief finger at the smaller partner but if the UK were to go, Germany would be holding an even larger share of the EU grief. So if pressure increases on EU, buy Bunds. But they weren’t moving in the normal counter direction to equities. Correlation break 2.

The JPY has been bid throughout all of the stress and though oil was down, China down and Bunds up, JPY has been weakening with GBP/JPY doing exactly what it shouldn't do according to the narrative of the last 2 days by going up. Correlation break 3.

And look at AUD/USD, as Europe came in and saw what China had done AUD had shrugged it off and was higher than where London had left it, chosing to take its lead from DM rather than China. Correlation break 4.

I find it a bit difficult to follow this blogger sometimes, but I think what he's trying to tell us is that the bullshit market moves of the winter are now over and we can go back to stocks doing what they're supposed to do. After all, markets correlate in a fear environment, and they decorrelate once the fear passes, right? Haven't we already learned this?

No matter how good the underlying fundamentals, if you let the financial system implode, it will take the economy down with it. I don't know that the Fed needs to cut rates, or that they needed to cut rates as deeply as they did during the Asian Financial crisis, but I do know this: The monetary authority should not tighten into financial turmoil. Wait until you are out of the woods. That's Central Banking 101. And I suspect that is ultimately the direction the Fed will take.

Bottom Line: Despite some hawkish talk, the Fed will find themselves in risk management mode at the March meeting. Some will not like it. There will remain a contingent that fears standing still risks excessive overshooting of the inflation target.

Yo Timmay! What if, by the March meeting, two weeks from now, $SPX is at 2050? Will they still be justified in holding off, per your argument? Will you not even be worried, once the S&P is back to where it was?

For fuck's sake, guy! The S&P is down 10%. It's not a fucking 2008 collapse. Yes, DB and the other EU banks are collapsing, but that's only because their business model of money laundering and tax fraud is under threat from a passing fad of fining banks for RICO-level criminal activity.

Tim Taylor - causes of falling real world interest rates. No, it's not financial repression by the Fed, no matter how much blathering idiots in the blogosphere assert it is: it's an excess of saving over desired investment. With a link to a pdf book on the topic, if you want to learn some basic economics.

The most recent report puts the white unemployment rate at around 4.5 percent. The black unemployment rate? About 8.8 percent.

But the economic picture for black Americans is far worse than those statistics indicate. The unemployment rate only measures people who are both living at home and actively looking for a job.

The hitch: A lot of black men aren't living at home and can’t look for jobs — because they’re behind bars.

Though there are nearly 1.6 million Americans in state or federal prison, their absence is not accounted for in the figures that politicians and policymakers use to make decisions. As a result, we operate under a distorted picture of the nation's economic health.

There's no simple way to estimate the impact of mass incarceration on the jobs market. But here's a simple thought experiment. Imagine how the white and black unemployment rates would change if all the people in prison were added to the unemployment rolls.

According to a Wonkblog analysis of government statistics, about 1.6 percent of prime-age white men (25 to 54 years old) are institutionalized. If all those 590,000 people were recognized as unemployed, the unemployment rate for prime-age white men would increase from about 5 percent to 6.4 percent.

For prime-age black men, though, the unemployment rate would jump from 11 percent to 19 percent. That's because a far higher fraction of black men — 7.7 percent, or 580,000 people — are institutionalized.

By the way, we don't study this in undergrad economics. Because black people don't matter, I guess?

Chris Dillow - employment and productivity on Coronation Street. It's a shit argument because it fails to account for the fact that employers are oligopsonists: they do actually extract surplus value from labour, and wages are not even remotely determined by marginal product - as anyone who's held a job in the real world can tell you. But I guess it's normal for economists to fall into the trap of thinking that 18th-century philosophers like Smith, who never saw data in his life, can actually construct anything close to a true mathematical model for wage determination.

Your TA, see, doesn't understand that this past few months of crybaby bullshit was just a cokehead hedge fund reaction to the usual winter slowdown in US GDP, with associated panty-piddle over Janet raising rates because she knows how to find data that predicts unemployment and inflation 6-12 months out.

And now that the Atlanta Fed's 1Q16 GDP prediction is back at 2.5% (to be updated later today), which is above the blue-chip consensus, all of a sudden the "global slowdown" talk is looking stupid and people are buying stocks back.

So you can quit reading TA blogs now.

I especially laugh at the one guy who's even compensated for his dismal past predictions by inventing a funny new sort of dome-line that doesn't exist in any chart book I've ever read. Yup, buddy, I'm sure the S&P 500 will halt at 2000 and the SMA(200) - for two days, like it did at 1950, before going up some more. Good luck beating the S&P index ETF this year like you haven't done for the past 5 years.

They've put up some video of them playing in London in 1980, in the classic two-Martha period, when there were still two Marthas.

Martha Ladly sort of plays trombone on this song, I never knew Mark Gane played left-handed, and my god London must have totally hated this. It's like Robert Fripp's League of Gentlemen meets J. Geils Band.

Shitty weather today, so I've skipped classes to bring you a bit of news:

Tim Duy the Science Guy - not all Feds on board with March rise. It'll be good if Lael Brainerd manages to get in an "i told ya so" or two at the next meeting, because she seems far more intelligent and circumspect than a lot of the others on that board.

The world economy is slowing, both structurally and cyclically. How might policy respond? With desperate improvisations, no doubt. Negative interest rates have already moved from the unthinkable to reality (see charts). The next step is likely to include fiscal expansion. Indeed, this is what the OECD, long an enthusiast for fiscal austerity, recommends in its Interim Economic Outlook. But that is unlikely to be the end. With fiscal expansion might go direct monetary support, including the most radical policy of all: the “helicopter drops” of money recommended by the late Milton Friedman.

More recently, this is the policy foreseen by Ray Dalio, founder of Bridgewater, a hedge fund. The world economy is not just slowing, he argues, but “monetary policy 1” — lower interest rates — and “monetary policy 2” — quantitative easing — are largely exhausted. Thus, he says, the world will need a “monetary policy 3” directly targeted at encouraging spending. That we might need such a policy is also the recommendation of Adair Turner, former chairman of the Financial Services Authority, in his book Between Debt and the Devil.

Why might the world be driven to such expedients? The short answer is that the global economy is slowing durably. The OECD now forecasts growth of global output in 2016 “to be no higher than in 2015, itself the slowest pace in the past five years”. Behind this is a simple reality: the global savings glut — the tendency for desired savings to rise more than desired investment — is growing and so the “chronic demand deficiency syndrome” is worsening.

As noted in the article, the OECD has been pretty consistent in its half-brained defense of austerity, in the face of a savings-investment imbalance, for years now, so the significance of their shift towards recommending government investment should not be underestimated.

And, of course, ultimately it all boils down to a bunch of sixtysomething flaccid micropenises being jealous of Justin Trudeau's manliness.

Tuesday, February 23, 2016

I predict the referendum turns out in favour of UK exit from the Eurozone.

Because at least 50%-plus-one of the English are racists who are so xenophobic they even hate the Polish. Fuck, a quarter of them are going to think they're voting in favour of kicking out the Indians who've been there for 50 years.

Plus, obviously, City of London is in favour of Brexit, since they don't want their banking system under the purview of EU regulators now that the EU has made a few tentative baby steps towards shutting down money-laundering and tax evasion.

City is really what's behind the vote, and you can tell cos that's where flaccid micropenis Boris Johnson is getting his orders from.

Aside from sentiment and the election, here is what I think could go right for the stock market over the next 6 – 9 months:

1.) Inflation: sounds like the proverbial pipe-dream, but the core CPI data is starting to increase, and it isn’t just starting to increase, but to increase at an increasing rate. Still it is doubtful that the US consumer is headed for the kind of mild hyper-inflation we saw in the late 1970’s. Services are 80% of GDP, and the services CPI is nearing 3%. It is a drum I’ve beaten before for readers, but check out Bespoke’s research and in particular the Bespoke Weekly letter that Paul Hickey authors every week. Walmart is America’s largest employer and they are scheduled to institute phase II of their wage hike for hourly employees. It will be interesting to see how and where this shows up in inflation and average hourly earnings data (think monthly nonfarm payroll report).

2.) GDP growth: Barron’s noted this weekend that the US economy could be looking at 3% GDP growth in Q1 ’16. Retail sales were strong for January ’16. Growth is good – better earnings growth isn’t showing up in earnings yet, though.

3.) Weaker dollar: the dollar index continues to back off it’s 100 level that it traded around from late March ’15 through early January ’16. A drop through 95 might indicate another leg lower. The important thing though is that the dollar index not strengthen from here and break through 100. My own opinion is that a continued gradual decline in the dollar index gives Janet Yellen some room to push rates higher since a stronger dollar is a “de facto” tightening.

4.) Crude oil prices: a stabilization around $30 wouldn’t do much for the cash-flow strained small and mid-cap energy companies, but at least a stabilization in crude might have a positive psychological affect on investors.

5.) The hardest hit sectors in 2015 – Energy, Basic Materials, the Russell 2000, biotech, and Emerging Markets – start to stabilize. Given the tech and financial bear markets of the 2000’s those two sectors seemed safe for overweighting, but both sectors have been hit hard in 2016.

6.) Value is starting to outperform growth, still not the 900 basis point out-performance that Growth held versus Value in 2015, but it is a start.

One source thinks the three most over-crowded trades are:

1.) Long US-dollar

2.) Short Energy

3.) Short Emerging Markets

Breaking these over-crowded trades might go a long way to breaking the psychology of this market. (Long XLE, IYE, CWO, EEM in small quantities.)

Some things worth considering, there.

Point one is especially intriguing, since part of the present market turmoil seems to originate with confusing a typical winter slowdown with a disproof of the Fed's argument that rate rises should begin now because they see inflation coming 6-12 months down the pipe.

And then the highlighted part of point 3 becomes important as well, since lower dollar is a good substitute for monetary loosening, as Lael Brainard would certainly agree. She'd be okay with rate hikes in a weakening USD environment.

But if you're just assuming that the winter downtrend continues into the future, and that USD appreciation continues into the future, it does become logical to piddle your frilly pink panties.

Back at school after reading week, things going fine. I'm probably going to stretch out my undergrad for an extra year so I can take the grad-prep theory seminars, plus one stats and one calc course each semester, so that I can be well situated for grad school, which apparently involves significantly more math.

After all, if I can keep up my borderline A/A+ average throughout undergrad, then the only thing that could possibly keep me out of a Ph.D. in econ is insufficient math skills. And math courses are the best thing you can take in university:

1) Nothing new has happened to math in decades, so you can use an older edition textbook that you get for free via torrent without being hurt in the slightest;
2) you even have a choice of maybe a half dozen textbooks for each course, since all math courses are pretty much standardized;
3) studying is laughably easy: you just read the section the prof lectured on today, then do 30 odd-numbered questions to make sure you understand;
4) want more practice? get another textbook and do their odd-numbered questions too;
5) don't understand section 3.4's explanation of eigenvectors? Read a different textbook, it might be better;
6) because of all of the above, you really don't even have to go to a single lecture, as long as you do the homework and the online assignments and show up for the tests.

If you have no facility at math, you don't want to take uni math; then again, I really think you only do badly in math if you don't do the homework.

Anyway, those are the plans for now.

So here's some news:

CFA Institute - earnings calls' 4Q macro anecdotes. Advertising remains strong, gambling remains strong, e-commerce in China remains strong, and so on. Also remember that most of these CEOs' opinions are clouded by the fact they read zerohedge and are piddling themselves over the 20% hit to their investment accounts this year.

Simon Wren-Lewis - the austerity winds have changed. I've seen quite a bit of this myself from the mainstream (not lefty) polecon commentariat - there's a new realization that interest rates are at zero, government investment is actually necessary, investment at zero interest makes investment worthwhile, and P.S. Justin Trudeau is actually coming off as one hell of a lot smarter than neocon fuckwits like Osborne and Schauble. No, seriously, I do boil it all down to Trudeau: his dad was universally considered a world-shaker, and people see Jr. is fixing to follow in his footsteps. Don't underestimate image in politics: George Osborne will go down in the history books as just another flaccid micropenis, and he knows it, and it steams him.

P.S., many famous tumblr chixxx are turtally in lurve with that hunky Justin Trudeau. They see pictures like this:

the feminine of "fap" is apparently "paf", btw

and they just go moist. They are all calling him a hunk. Now, do you think that this doesn't inspire tremendous jealousy among other politicians? So could he single-handedly rescue the entire planet from the zero lower bound just by being a hunk? And, um, spending a few billion on highway and port upgrades?Bonddad - a simple explanation of infrastructure investment so simple even a stupid jackass could understand it. Hale Stewart raises the bar for internet abuse. And yes, I spent over 10 years calculating 30-year NPVs of highway construction projects, and it does really work this way, at least until neocon politicians start waving around their flaccid micropenises.

Brad DeLong - the melting away of N.Am. social democracy. I await anyone in economics, e.g. Brad DeLong, explicitly tying in the past 35 years of neocon policy with the present S/I disequilibrium and ZLB. Don't make me write a fucking thesis on this.

Reuters - Bush's bankster buddies transfer support en masse to Rubio. Y'know, in this primary season, both on the D side and the R side, bankster collaborators (see Hillary) have found their kleptocratic association to be a disadvantage. So I suspect this power transfer won't hurt The Donald all that much, frankly.

Monday, February 22, 2016

I am very happy because everyone is paying attention to a bunch of silly charts that are asserting the US market is going to remain in a downtrend, even though this same weakness has happened every winter and has gone away every following spring.

Meanwhile, this is happening:

People are no longer piddling their panties about the US market. $VIX futures are back in contango.

And maybe this is why:

The nowcast for GDP is back above the consensus expectation, which seems about as primal a contrary indicator as you can get.

I find it hilarious that so-called dispassionate "it is what it is" chartists have really just been absorbed into the larger US cokehead hedgefund piddle-party.

Sunday, February 21, 2016

New Deal Demoncrat - weekly indicators. Real M1 dropped severely this week. Then again, I guess that's what we're supposed to expect when a central bank starts a tightening cycle, right? And M1 did go down constantly from 1994 to 2001. I guess the question is whether credit growth stays positive enough to keep M2 growth at 5%/y with a decreasing M1.

Tangentially, I guess the proper questions to ask Yellen, by the way, are whether she feels the money multiplying machinery of the economy has what it takes to accommodate M1 contraction, because after all it's only going to cause economic contraction if the banks are unable to keep multiplying off a smaller base, and they can't if there's insufficient aggregate demand to take up new loans, and does she really think GDP trend is so much lower now than it was a couple decades ago that it's suddenly become okay to tighten at 2-3% growth. Then again, I suspect that she did study macroeconomics at university.

The Fed did not make a mistake in December. It made a mistake all last year by talking up interest rate hikes and signalling a tightening of future monetary policy. Since markets are forward looking, this expectation got priced into the market and affected decision making. The Fed did this even though the economy was not back at full employment. The December rate hike was just a confirmation of these expectations.

The Fed, in other words, got ahead of the recovery well before December. Damage was already being inflicted on the economy by the time the actual rate hike occurred[....]

And then he presents a whack of charts to illustrate all the damage that was being done all through 2015.

Basically, generating expectations is a big part of monetary action, and the Fed did far too much generating of expectations of a rate hike.

I guess they're damned if they do and damned if they don't.

New Deal Demoncrat - retail sales and real compensation. Retail sales still going up, production/nonsupervisory wages still going up, production/nonsupervisory real aggregate income still going up. And with consumption as a large percentage of GDP, that means no recession.